Diamond Prices Projected to Rise?

[diamondseeker2006]

I found this interesting and alarming since the diamond price increases of 2011 caught many off guard. I had hoped prices would climb very slowly from here on out, but those with projects in mind might want to think about the timing of diamond purchases and upgrades very carefully.

https://www.pricescope.com/blog/pricescopes-garry-holloway-projects-30-rise-diamond-prices

(I just saw that Garry's picture is currently right next to my post. And I must say, you look very handsome, Garry. )

 

[crown1]

i find these kinds of articles and news releases disturbing. whether it be gas, peanut butter, handbags, diamonds or anything else i find the warnings bothersome. i have read of others speculating that it is a good way to get some people to purchase and to manipulate sales. i do not agree with the practice. so many ways the economy is manipulated. just not a fan. are we to believe we are being done a favor, being notified to buy before the increase? i find that hard to believe. jmho.

 

[denverappraiser]

Bear in mind that projections are just that, projections. The people at BHP and RioTinto are selling off their diamond assets becasue THEIR projections look different. My gut feeling is to agree with Garry but I dare to guess that some smart people at Rio et.al. put some serious thought into this question before concluding that they would rather be doing something else.

 

[Christina...]

 

[glammy]

I know you are in the market. I hope you find something before this occurs. It would be so disappointing to have waited and saved, only to encounter a sharp increase!

 

[06pvc]

Bear in mind that projections are just that, projections. The people ar BHP and RioTinto are selling off their diamond assets becasue THEIR projections look different. My gut feeling is to agree with Garry but I dare to guess that some smart people at Rio et.al. put some serious thought into this question before concluding that they would rather be doing something else.

I agree with this. Markets tend to be efficient. This means markets are equally likely to experience abnormal price decreases as well as increases. Abnormal defined an increase over the historical norm, which I imagine in diamonds cases has been similar to inflation.

Think of it this way. If we knew diamonds where likely to increase, you could buy diamonds now, sell them after the 30% increase and make money for sure. However this is not possible in well functioning markets.

 

[marymm]

Anecdotally, I recently purchased a sub-carat WF Expert Selection - I'm still in the 30-day return window - sometimes I visit its online listing and today the listed price had increased by $500.00 (though it still shows the "sold" status) - wow!

 

[diagem]

Presently the way things look..., I would say Garry is optimistic regarding his time frame projection.
I am hoping his estimation on how the rough segment will play out is wrong but the signs present show differently.

If such a big (estimated at 30% marketshare) investment player will enter the game, who knows where we are heading in the future.

 

[Christina...]

I know you are in the market. I hope you find something before this occurs. It would be so disappointing to have waited and saved, only to encounter a sharp increase!

Thanks Glammy! JA has just increased their prices as well, so I'm not optimistic about where we may be headed. I've extended my search, and am keeping my fingers crossed, inventory seems low for what I'm looking for so that isn't helping.

 

[MichelleCarmen]

If the prices keep going up, nobody is going to be able to afford to own a diamond!

That said, I bought a diamond a few years back and it was traded back to the vendor and saw that it was relisted for $300-400 more than what I paid, but now when I go back to the same vendor site, I see comparable diamonds for only $100 more than what I originally paid. It seems the prices for that size/color/clarity with the same vendor, same cut, have gone down!

 

[Laila619]

If the prices keep going up, nobody is going to be able to afford to own a diamond!

That said, I bought a diamond a few years back and it was traded back to the vendor and saw that it was relisted for $300-400 more than what I paid, but now when I go back to the same vendor site, I see comparable diamonds for only $100 more than what I originally paid. It seems the prices for that size/color/clarity with the same vendor, same cut, have gone down!

I know! I am wondering if we're going to start seeing a lot more colored stone e-rings. Or maybe the 1 + carat e-ring will be a thing of the past, and new shoppers will have to buy a .75 or smaller just to even be able to afford it.

 

[diamondseeker2006]

All I can say is that in late 2010 we were hearing warnings from some of the experts around here that prices were about to rise. And most of us didn't pay too much attention. But one day in Feb. 2011, I was looking at diamonds for new studs and I literally saw the first big price increase happen as changes were made on a website. I quickly reserved the stones I was looking at and bought them. But as 2011 went by, I saw several other increases and watched the prices go up steadily on the stones I had just
bought as well as stones similar to my ring diamond. Prices do fluctuate up and down all the time, but these increases were substantial and diamond prices still remain higher than they were in early 2011.

So when I hear people like Garry, Yoram, and Paul Sleger's warning of possible new price increases, I listen.

 

[diamondseeker2006]

(sorry for the apostrophe in Paul's last name...didn't see the mistake until the edit button was gone)

 

[distracts]

I know! I am wondering if we're going to start seeing a lot more colored stone e-rings. Or maybe the 1 + carat e-ring will be a thing of the past, and new shoppers will have to buy a .75 or smaller just to even be able to afford it.

But colored stone prices have gone up like crazy in the past couple of years as well, unless you get something that is crazily treated! I think we'll be seeing a lot more simulants and synthetics - most of my other engaged friends have fake stones in their ring, it's all either CZ, moissanite, or lab-created colored stones. Many people don't care about anything but the look of the thing. I wonder sometimes if the industry is shooting itself in the foot with things like this.

 

[coati]

Presently the way things look..., I would say Garry is optimistic regarding his time frame projection.
I am hoping his estimation on how the rough segment will play out is wrong but the signs present show differently.

If such a big (estimated at 30% marketshare) investment player will enter the game, who knows where we are heading in the future.

This.

And, I don't think Garry's projection is a scare tactic as much as it is a global reality. Every other day, I read an article about diamond demand from India and China--countries with steadily growing middle classes (and burgeoning millionaire and billionaire classes) gobbling up the world's diamonds. In 2011 Harry Winston put 100% of capital investment into building new HW stores in China--follow the money, the appetite, and then look at supply.

Rio, BHP Lose Faith in Diamonds Even as Prices Rise: Commodities

BHP and Rio, which together accounted for about 16 percent of global diamond production by value in 2010, have failed to match the output of industry leaders De Beers and OAO Alrosa of Russia. That contrasts with the position in iron ore, where along with Brazil’s Vale SA, they have a market share of about 63 percent, according to estimates from Bloomberg Industries.

“They can’t get the scale they want,” said Ed Sterck, an analyst at BMO Capital Markets. “Diamonds don’t really fit with the modus operandi of the big diversified majors and it’s always been a bit of an anomaly that they’ve stuck with it.”

Rough-diamond prices rose 24 percent last year after two consecutive annual gains of 32 percent as producers struggled to keep pace with consumption. That advance could be prolonged as stagnant production fails to satisfy surging demand from China and India.

The use of diamonds may grow at double the pace of supply through 2020 because of an expanding middle class in the two Asian countries, according to Bain & Co., the consulting firm.

**To read further projections on diamond supply vs. global demand, check out the Bain report.
The Global Diamond Industry - Lifting the Veil of Mystery

And here at Pricescope...
Last year, we charted average retail diamond price increases for D-I color and VVS2-SI2 clarity from January through July 2011:

0 to 0.5 ct 19%

0.5 to 1.0 ct 26%

1.0 to 2.0 ct 18%

2.0 to 3.0 ct 16%

3.0 to 4.0 ct 19%

4.0 to 99 ct 22%

https://www.pricescope.com/blog/rising-retail-diamond-prices-mid-year-review

We do a monthly update on retail diamond prices with a roundup of diamond price news as well. https://www.pricescope.com/blog?tag=Diamond Prices

Pull back and look at precious resource extraction. With nearly 7 billion people living on this planet, the odds aren't in the favor of price reduction.

 

[Karl_K]

Personally I think prices will continue rise.
However predicting how much is problematic.
My opinion is that there is a price point where people are just going to say forget it and not buy one.
As a matter of fact I know several people who have done so.
They looked at what their money could buy and some decided on bands and spending the money on stuff they felt was more important to their future. One went with man made ruby, another CZ.
My point is I think the predictions for demand are somewhat flawed.
The increased sales in other places can not anytime soon replace the US E-ring market which in my opinion they are rapidly pricing themselves out of the market.
Spending $5-$10k+ on a ring was a lot easier when you didn't have to have a 10-20% down payment to buy a house.

 

[Garry H (Cut Nut)]

Thanks all for interesting discussions.

Neil BHP-B and Rio are selling assets that are too small and non-core. e.g. Diamonds were 7% of Riotinto revenue 2 decades ago, now they are less than 2% and Argyle is a mess – they have spent $1.5B more on the underground development than they planned, with huge geo-tech issues and flooding probs. Both are the biggest mining Co’s shipping boats full of iron ore and coal and oil etc. Small shrinking diamond businesses don’t fit. Rio has an expandable mine in Zimbabwe but does not like operating there. Both have spent a lot on exploration but not found much of consequence, esp BHP. Only the Russians seem to be finding more diamonds. Most big mines are nearing completion.

Does anyone think KKR will employ a single Geologist?

All the majors and the recent Bain report have indicated a 10 year supply demand deficit. Bain suggest 3% to 11.1% PA demand growth with 6.6% as the likely outcome. But supply growth will be 0% to 5%.
That Bain report is fantastic - about 90 pages.
I sanitized a version and added some bits, corrected a few minor errors and have given all my staff a copy. Up to them if they read it all - but most will. It outlines why demand will go up with some great research and bar bcharts for India and China.

My 30% rise in 2 years is in AUD / A$ and that is partly because we have a fed rate of 4.25% that is crippling the economy and supporting a very high A$. This will fall and our rate of about 5% more than the USD will drop to about 5% less. We are receiving investment funds from mums and dads in Japan and dependant on China for mineral sales. China growth is dropping – and that will cause the A$ to fall further.

 

[MichelleCarmen]

If the prices keep going up, nobody is going to be able to afford to own a diamond!

That said, I bought a diamond a few years back and it was traded back to the vendor and saw that it was relisted for $300-400 more than what I paid, but now when I go back to the same vendor site, I see comparable diamonds for only $100 more than what I originally paid. It seems the prices for that size/color/clarity with the same vendor, same cut, have gone down!

I know! I am wondering if we're going to start seeing a lot more colored stone e-rings. Or maybe the 1 + carat e-ring will be a thing of the past, and new shoppers will have to buy a .75 or smaller just to even be able to afford it.

Yep, either people will go smaller or go to the used diamond market. In fact, there are only a couple of vendors I'd buy from new as I've still seen some reasonable prices...otherwise, it makes more sense to buy preowned (which, at the rate things are going means the price of preowned will be the equivalent of what a new diamond would have been five years ago!).

 

[Black Jade]

Diamond prices still are nowhere near where they were in the early 1980's when I was a fiancee/bride.

http://online.wsj.com/article/SB10001424052748704337004575059723597630174.html

They went up sharply then (this is why all us 50ish ladies, if we kept our original rings, have less than 1/2 carat--often less than 1/4 carat) and then the price went down. Especially if you adjust for inflation. Prices have been rising for the last two years but they still are nothing like what happened then and I don't believe that they are going there, either. Even though they will probably rise some more. They were flatlined for so many years that I think we consumers got spoiled.

People keep sayng that buying in China and India will cause us to pay more. I don't know anything about India, but having been to visit China last year, I doubt it. There are a tiny amount of billionaires and Hong Kong capitalists that can afford rocks at Christies but your average rising middle class Chinese bride is getting something like .10 of a carat, if that. What they have in rings over there is melee over here and I don't think it has or will have much effect on our market. What is having and will have more effect on our market is the continuing inflation here and the devaluation of US $$$ which makes all prices of everything seem to have risen--and also the continuing terrible economy (the 'recovery' where people are still losing jobs at a rather incredible rate). For many young couples, housing and other necessities cost a bunch and diamonds are a luxury. So I think, yes, a lot of kids nowadays are getting moissanite or other fakes and colored stones (though the price of colored stones is going up also). In the 1980's there wasn't moissanite and CZ yet so we all got so we thought small sized rings were normal but nowadays there are other choices so people can keep liking a 'big' look, but keep the budget under control. Of course if you are on the board, you can probably still afford a diamond, which is great. And hereon Pscope you can learn to maximize the budget and get a good deal. I think you can probably assume diamond prices are going to rise somewhat so if you are currently in the market and have some idea of what you want maybe you should get it now rather than say, in September, I don't think anyone can tell you exactly what to do though as everyone is just guessing (though some with more knowledge than others).